Understanding Balloon Payment: A flexible financing option for Filipino buyers

Balloon Payment

When it comes to buying a vehicle (a car to be specific), financial flexibility for a buyer is super essential. And today we’ll be shedding some light on one such financing tool designed for this very purpose, i.e., allowing buyers to manage monthly budgets effectively. We are talking about Balloon Payment, however, to everyone's surprise, this financing option is yet to enter the main streams of the Philippines financing arena and at the moment is only offered by Toyota Motors Philippines.

KEY TAKEAWAYS

  • Can businesses avail of Balloon Payment Plus?

    Yes, Balloon Payment Plus is suitable for both personal and commercial use.
  • Does Balloon Payment Plus include insurance?

    While the program includes Periodic Maintenance Service, insurance coverage is typically separate.
  • Is Balloon Payment Plus available for all Toyota models?

    No, BPP is available for select models. Visit an authorized Toyota dealership to confirm model eligibility.
  • What happens if I can't pay the balloon payment at the end of the term?

    If you're unable to pay the balloon amount, you can explore refinancing options or negotiate an extension with Toyota Financial Services Philippines.
  • So, if by any chance you are planning to buy a reliable and efficient Toyota car then we’d recommend checking out the Balloon Payment financing option for sure. See if it makes managing finances a little easier or not for you.

    To make things easier give this article a thorough read as here we delve into the key aspects of balloon payment financing, with a specific focus on the Balloon Payment Plus program by Toyota Philippines.

    So, let’s get started.

    Understanding Balloon Payment Financing

    Understanding Balloon Payment Financing

    In short, the borrower makes small and equal monthly payments with one big lump sum payment at the end of the financing period called the ‘balloon payment’. This allows buyers to manage their monthly budgets more effectively with reduced initial payments while planning for the larger final installment.

    Ballon Payment in the Philippines

    In the Philippines, Toyota Financial Services Philippines (TFSPH) offers a unique solution with their Balloon Payment Plus (BPP) financing plan. The plan is tailored to meet the needs of Filipino buyers seeking a budget-friendly option without sacrificing quality or convenience.

    Ballon Payment in the Philippines Photo from Toyotafinancial

    You must be wondering, why no other automaker is offering Balloon Payment as a financing option. Well, while there are several benefits of introducing it both for the automaker and the customer, it does come with its own set of challenges. We’ll be discussing all of it in the upcoming section.

    Also Read: Car loan scams in the Philippines: Applicants be aware

    Benefits of introducing Balloon Payment for automakers

    1. Broadening customer base

    Balloon payment plans make vehicles more accessible to middle-income buyers. By reducing monthly payments, automakers can target new demographics, including young professionals and first-time car owners. This enables customers to drive high-quality vehicles without overextending their budget.

    2. Strengthening brand loyalty

    This financing option often facilitates easy trade-ins for newer models (sadly, not in the Philippines yet), encouraging customers to remain within the brand ecosystem.

    3. Givers an edge over others

    This unique financing option helps automakers stand out in a crowded market, attracting buyers seeking affordability and value-added services.

    Challenges to consider when introducing Balloon Payment

    While balloon payment plans offer many advantages, they come with challenges including

    1. Lack of consumer awareness

    Not all buyers are familiar with balloon financing, necessitating education campaigns.

    2. Default

    The large final payment might pose risks for some buyers, leading to higher default rates if not managed carefully.

    Understanding Toyota Balloon Payment Plus

    Toyota Financial Services Philippines (TFSPH) offers a unique solution with its Balloon Payment Plus (BPP) financing plan. It is tailored to meet the needs of Filipino buyers seeking a budget-friendly option without sacrificing quality or convenience. It combines affordability with several added benefits including -

    1. Low monthly payments

    It allows customers to enjoy lower monthly payments compared to regular financing options.

    2. Flexibility

    It provides customers the flexibility of choosing the down payment, finance terms, and end-of-term options. Furthermore, it allows customers to allocate resources toward other priorities without overextending their monthly budget.

    3. Ease of availability

    Toyota Balloon Payment Plus is now available with all Toyota Dealers nationwide and with more Toyota models.

    4. Maintenance coverage

    Regular Periodic Maintenance Service (PMS) is included throughout the term, ensuring the vehicle stays in peak condition.

    5. Accessibility

    This program enables individuals to afford higher-end models with lower initial costs compared to traditional financing.

    Balloon Payment in the Philippines Photo from pigly

    How does Toyota Balloon Payment Plus work?

    Step 1: Choose a Toyota

    The first and foremost step to take advantage of the Toyota Balloon Payment financing option is to select a Toyota car you wish to purchase. The service is available for the following models -

    Note, while Balloon Payment Plus is available for many Toyota models as you can see, it’s particularly attractive for buyers interested in premium options like the Vios, Corolla, and Fortuner. All of which are preferred for their reliability and excellent resale value.

    Step 2: Choose a down payment

    The next step after selecting a car is deciding on the downpayment. Remember the more to pay as a downpayment, the lesser would be the burden, however, the goal here is to offer customer payment flexibility, so do as your budget allows. Toyota offers the following downpayment options -

    • 20% of the vehicle price
    • 25% of the vehicle price
    • 30% of the vehicle price

    Step 3: Decide on the finance term

    Once you are through with the down payment, it is time to decide the course of the period over which you will pay the remaining amount. Toyota offers the following term options for the balloon payment -

    • 24 months
    • 36 months
    • 48 months
    • 60 months

    Example -

    Imagine a buyer purchasing a Toyota Fortuner worth PHP 2,650,000 through Balloon Payment Plus.

    • Downpayment: 20% of the vehicle price (PHP 530,000).
    • Loan term: 36 months.
    • Monthly payment: PHP 41,104 (lower than traditional financing).
    • Balloon payment: PHP 1,590,000 at the end of the term (60%)
    • At the end of 36 months, the buyer will have to pay the balloon amount or refinance it for further flexibility.

    Eligibility and requirements

    Balloon Payment Plus requirment Photo from Toyotafinance

    To avail of Balloon Payment Plus, buyers must meet specific eligibility criteria set by Toyota Financial Services Philippines. However, the requirements vary depending on whether the buyer is employed, self-employed, or OFW/SEAFARER. The table below gives complete details -

    Balloon Payment Plus - eligibility

    The list of valid government-issued IDs includes - GSIS ID, SSS ID, Postal Identity Card ID, Philippines Identification/ePhilID, LTO Driver’s License, PRC (Professional Regulation Commission), UMID, Postal Identity Card ID.

    Tips to plan balloon payment

    To avoid financial stress in the future, it is essential to properly plan for the balloon payment. Here are some tips to help -

    • Saving regularly: Make sure to allocate a portion of your monthly savings towards the final lump-sum payment.
    • Loan refinancing: You can explore refinancing the balloon payment to extend the term further.

    Balloon Payment Plus vs. Traditional Loans

    Balloon Payment Plus vs. Traditional Loans

    The added benefit of maintenance makes Balloon Payment a compelling choice for buyers.

    Bottom line

    Balloon payment is a practical and flexible financing solution for car buyers. In the Philippines, Toyota Motors Philippines is the only automaker offering this forward-thinking option that lowers monthly payments and offers essential maintenance. It allows customers to enjoy Toyota's renowned reliability and quality without financial strain.

    Also Read: Top 15 banks for affordable car loans in the Philippines

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